The day may yet come when the eurozone finally agrees a comprehensive package to end the crisis, but this was not the day.

The bounce on stock markets through Thursday was nothing much more than whistling past the graveyard and on the eve of Halloween weekend to boot – entirely appropriate and of course by Friday everything was beginning to feel eerie with markets beginning to go off and the alleged Italian plan looking more like The Italian Job.

Second the spectacularly disastrous condition of Greece – and what has caused this collapse – needs to be gleaned from the communiqué. Third, the banks recap is smoke and mirrors while finally the general scheme of it all, EFSF2½, is imaginative fantasy in the tradition of that children’s tale, The Magic Pudding.

On the evening of 19 October, the FT’s rolling blog reported, the most senior politicians, diplomats and officials of the eurozone (EZ) and with Christine Lagarde (of the IMF) in train, gathered in Frankfurt. They had an appointment – a night at the opera with M Trichet ECB president (retiring) and Draghi ECB president (incoming). They also decided to go through a pretence of wrestling with deep policy issues on the future of the eurozone with M Sarkozy dramatically dashing from a Parisian maternity ward to get to Frankfurt on time.

With the passage of the past few weeks one has gone from initial disbelief to growing incredulity to the final realisation that actually, in both the EU and the US there is a now almost complete incapacity to formulate and implement anything approaching a coherent set of economic and financial policies capable of addressing the series of interrelated problems besetting both economies. In Europe there is on the official view first the Greek problem, second, the banking crisis and third, the finalisation of EFSF2 – the package agreed in outline (which is to say not agreed at all and no more than a fraudulent pretence) three months ago. All three issues are inter-related but they are also three quite separate bits. In the US the EZ crisis also has real implications for American banking – and thus the prospective triggering of a global contagion. To be fair to the Americans they have banged on at the Europeans (Obama and Geithner in particular) but to no avail whatsoever. Again though (Democrat) Washington also is paralysed: a Republican/Tea Party politics, deeply reactionary but entirely coherent holds the political balance. They are using it in effect to unpick those small remnants of the New Deal and Johnson’s Great Society (as well as their antecedents in nineteenth century progressivism) that have survived the last couple of decades. They also believe the wrong side lost the Civil War, the Federal Government is unconstitutional, the Federal Reserve is adulterating the dollar – and an awful lot else. They have a visceral hatred of banks (but hate Washington much more) – something they share with Occupy Wall Street. Read the rest of this entry »

‘O Presidente’ in his ‘state of the union’ vanity show address yesterday unveiled among other things the European Commission’s proposal for a ‘Tobin Tax‘ or officially a Financial Transactions Tax (FTT). It would fall on monetary and financial institutions (MFIs), banks to ordinary people. It would apply to inter-MFI transactions within the EU and between EU MFIs and third country MFIs. In the commission’s own words,

The financial sector was a major cause of the crisis and received substantial government support over the past few years. To ensure that the sector makes a fair contribution to public finances and for the benefit of citizens, enterprises and Member States, the European Commission on 28 September put forward a proposal for a financial transaction tax (FTT).

So:

Through the FTT, the financial sector will properly participate in the cost of re-building Europe’s economies and bolstering public finances. The proposed tax will generate significant revenues and help to ensure greater stability of financial markets, without posing undue risk to EU competitiveness.